What is a Health Savings Account?
An HSA is a tax-free savings plan from which covered employees and individuals can pay for certain qualified medical expenses. Consumers are allowed to deposit pre-tax dollars into an HSA up to certain yearly limits. For 2013, the limits are $3,250 for individuals and $6,450 for families. An HSA can only be used in conjunction with a qualifying High-Deductible Health Plan, and is only available for people under sixty-five years of age.
Will money deposited into an HSA be lost if not used by the end of the year?
No. Many people worry that they may be getting a “use it or lose it” account, as were some of the older medical savings plans. An HSA works more like an IRA, except that the tax-free deposits and withdrawals are limited to use for qualified medical expenses. If the money deposited in any given year is not used by year’s end, the money remains available for later use in subsequent years, accruing interest.
What are High-Deductible Health Plans (HDHPs) and how do they work?
These insurance plans are newer on the market than the more traditional HMOs and PPOs. For the year of 2013, the minimum deductibles for an individual and a family are $1,250 and $2,500, respectively. The maximum out-of-pocket for any HDHP is $5,600 for individual coverage and $11,200 for family coverage. A High-Deductible Health Plan works like this: Instead of paying more up-front monthly premiums to an insurance company to get a co-pay structure at the point of service, a lower monthly insurance premium is paid. When an HDHP insured goes for medical service, he or she is charged the negotiated discounted rate which the insurance company has contracted with its network providers, at an average 25-45% discount from the uninsured rates. All payments made by an insured for any qualified medical expense, such as hospital charges, doctors’ visits and covered prescription drugs (if applicable to the plan) are applied toward the deductible. When paired with an HSA, the insured can use tax-free dollars from their Health Savings Account to pay for these discounted services. The overall cost savings for insureds that select HDHP HSA accounts are generally quite dramatic.
What are “qualified expenses” for an HSA? Are they limited to what is covered by the insurance plan?
The complete list of qualified expenses for health savings accounts includes a whole gamut of medical expenses, some of which are normally covered under health plans and some of which are not. Regardless of whether these expenses would be covered on a specific health plan, the HSA owner can use HSA dollars to cover any of the approved expenses as listed in section 213d of the Internal Revenue Code. A partial list of expenses which are considered HSA-eligible are: acupuncture, alcoholism treatment, ambulance, anesthetists, artificial limbs, birth control pills (by prescription), blood tests, braces, cardiographs, chiropractor, contact lenses, contraceptive devices, crutches, dental treatment and x-rays, dentures, dermatologist, diagnostic fees, drug addiction therapy, drugs (prescription), eyeglasses, guide dog, gynecologist, hearing aids, hospital bills, hydrotherapy, insulin treatments, lab tests, metabolism tests, neurologist, obstetrician, operating room costs, ophthalmologist, optician, oral surgery, organ transplant (including donor's expenses), orthopedic shoes, orthopedist, osteopath, oxygen and oxygen equipment, pediatrician, physicians, physiotherapist, postnatal treatments, prenatal care, prescription medications, psychiatrist, psychoanalyst, psychologist, psychotherapy, radium therapy, registered nurse, special school costs for the handicapped, spinal fluid test, splints, sterilization, surgeon, therapy equipment, transportation expenses (relative to health care), vaccinations, vasectomy, vitamins (if prescribed),wheelchair, and x-rays.
What is cancer insurance?
Cancer insurance is supplementary coverage to help offset financial setbacks which often come as a result of cancer. While medical insurance will pay benefits for established cancer treatments such as chemotherapy and certain surgeries, there are always expenses which are not covered by medical policies. Direct medical costs are only a portion of the total monetary toll cancer can take on an individual or a family. Non-medical costs add up quickly: transportation to and from treatment centers (for the patient and a companion), childcare, housekeeping assistance, wigs, and counseling often are not covered. Add to this the inevitable loss of income for the cancer victim and a spouse who often becomes the caretaker, and normal monthly expenditures balloon into an insurmountable obstacle. Cancer insurance pays benefits to the insured in addition to whatever costs the medical insurer pays.
How does a cancer policy work?
Whereas the medical insurance will pay medical personnel and facilities for services rendered, a cancer policy pays a monetary benefit directly to the insured when the insured is diagnosed with an internal cancer. This money can be used by the insured for whatever expenses he or she deems necessary. Most policies will pay a lump-sum upon first diagnosis. Some policies offer a large first-diagnosis lump-sum as their benefit, while others pay a smaller lump sum and subsequent payouts based on the insured’s treatments and other incurred expenses.
Is a cancer policy a replacement for a major medical policy?
No. A cancer policy should by no means be considered a replacement for major medical coverage. Cancer insurance is meant to supplement a health policy, and it usually covers expenses that would not be covered by a health policy.
Disability Income Insurance
What is disability income insurance?
Known by many industry insiders as “paycheck insurance,” disability income insurance is just that: coverage for loss of income when a person becomes disabled and unable to work. This insurance pays a pre-specified percentage of the insured’s income, should he or she become disabled. The policies that fall under this designation are most often differentiated by the size of payments available, the definition of disability, the length of the elimination (waiting) period, the length benefit payments are available, and often the type of employment of the potential insured. Coverage may also be limited by the cause of a disability, i.e., some policies only cover disabilities caused by an accident, others only cover disabilities caused by illness.
Why does an insurance company only pay a percentage of income?
Insurance companies (and some states) limit the amount of disability income coverage to prevent creating a monetary incentive for a person to stay on disability once he or she becomes medically able to return to work. The amount of benefits an insured receives from any one insurance company is also dependent upon what other benefits may be in place. An insurance company will coordinate benefits with other companies providing coverage to make sure a person is not receiving more than the state’s legal limit.
Are disability benefits taxable?
If a person pays for a policy with after-tax (net) dollars, the benefit will generally not be taxed; the amount was already taxed through payroll. However, if the policy was paid with pre-tax (gross) dollars or paid fully by an employer, the benefits with most likely be taxed.
What are the main types of disability insurance?
Short-term Disability insurance generally has a short elimination period of 0 to 14 days before benefits are paid, and benefits are paid for a limited amount of time, usually no more than two years. Long-term Disability insurance has a longer elimination period of several weeks to several months and will pay benefits for several years, to a specific age, or for life.
Doesn’t Social Security cover disabilities?
Social Security is subject to a set of stringent requirements which basically state that a person must be totally, permanently disabled and unable to earn income through any type of employment. There is also a waiting period of 26 weeks from date of total disability.
Doesn’t Worker’s Compensation cover disabilities?
Worker’s Compensation only covers injuries sustained on the job. Most debilitating accidents are known to happen in or near the home. It is best to have coverage for both eventualities.
What are some disability options for business owners?
If a business owner becomes unable to work because of a disability, income can dry up quickly and the day-to-day expenses can quickly bankrupt a company. A business owner can be protected by a Business Overhead Expense (BOE) policy. This type of insurance provides a business owner with the money to pay day-to-day business expenses until he or she recovers or can sell the business. For businesses owned by a partnership, a Disability Buy-Sell Agreement (funded by disability insurance) can be quite useful should a partner become disabled and therefore unable to perform his or her duties. If a disability appears to be permanent, the ensuing disability checks would then buy out the disabled partner’s interest in the company. The remaining partners would then become the owners, and the disabled partner would have cash equal to the value of his or her ownership interest. Sometimes, however, there are key people who do not have any ownership in a business, but whose services are deemed to be irreplaceable. A business owner can cover this person with a Key Person Disability policy, which would pay the company benefits should this key person become disabled. This money could then be used to offset financial loss created by the absence of the key employee or to pay somebody else to do the person’s work until that person can return or be effectively replaced.
What are the main types of Medical Expense Insurance?
Generally, medical expense insurance can be classified either as basic plans or major medical plans. Basic plans usually only offer coverage for surgical expense, hospital expense, or a combination of the two. These basic plans will generally cover the insured on a “first-dollar” basis, with no deductible to be met prior to receiving benefits. They usually reimburse 100% of covered hospital and surgical expenses, up to the contracted maximum. Conversely, major medical plans normally cover a wider range of medical costs, which may include hospital and surgical expenses, non-surgical physicians’ expenses, private nursing services, x-ray and laboratory services for diagnostic purposes, prescription drugs, ambulance service, and many other doctor-prescribed medical expenses and services. Major medical plans also have higher limits, but the insured takes a more active role, sharing part of the costs of the covered services; there are often deductible and coinsurance responsibilities.
What is a deductible?
It is the amount that an insured has agreed to pay before the insurance company becomes responsible for paying benefits. It is a means of cost sharing with the insurance company, and serves to motivate the insured to use medical services more wisely, thus keeping costs for the insurance company down. This translates into more savings for the consumer, reflected in lower premium charges. Some plans offer services only after a deductible is paid, and some offer a combination of pre-deductible services (which usually require a copayment) and services which are only reimbursed after the deductible is satisfied.
What is coinsurance?
Coinsurance is another way insurance companies keep costs down by sharing responsibility with the insured. It is usually applied after the deductible has been met. Coinsurance is often called “percentage participation.” On a policy with an 80/20 coinsurance provision, once the deductible has been met, the insurance plan will then pay 80% of covered medical expenses, and the insured is responsible for the remaining 20%. Medical expense plans often have a “stop-loss” limit, or a coinsurance cap, which places a maximum limit on the insured’s out-of-pocket expenses in any given calendar year. Should the insured meet both the deductible and the maximum out-of-pocket limit, the insurance company then covers all eligible expenses for the remainder of the calendar year.
What are copayments?
A copayment is a set amount an insured is required to pay for a certain medical service. Copayments are often found in “managed care” medical plans for doctor’s office visits, prescription drugs, and even occasionally for emergency room or urgent care clinic visits. Copayments usually do not count toward a plan’s deductible.
What are some common exclusions from major medical expense plans?
Some of the most universal exclusions are: routine (non-emergency) dental and vision care; cosmetic surgery (except for certain cases of birth defects, injuries, and post-mastectomy reconstruction); and on-the-job injuries and illnesses which are covered by Workers’ Compensation.
What is a preexisting condition and what effect can it have on insurance coverage?
A preexisting condition is a medical condition that has required treatment during a set amount of time before an insured’s date of coverage. In the state of Florida, this definition has been expanded to include any “condition that would have caused an ordinary prudent person to seek medical advice, diagnosis, care or treatment,” meaning that a person cannot wait until it is obvious that medical attention will be needed to buy insurance. Group health plans can exclude coverage for a pre-existing condition for up to 12 months. Under individual health plans, coverage for pre-existing conditions can vary. Many plans carry exclusionary riders for pre-existing conditions, which may be temporary (for twelve months) or permanent (for the life of the policy). The exclusion may be specific for the affected body area only, or may be general, for the entire related system. Some insurers will agree to insure the individual, but only with an increase in premium or deductible. Some pre-existing conditions are cause to exclude the person from any coverage at all.
What is the difference between group and individual coverage?
Group policies require an employer to pay a part of the employee-only premiums to be able to apply. It is underwritten based on the combined risk an entire group presents, and is often “Guaranteed issue,” meaning that the insurance company cannot turn down an applicant. To qualify, an employee must work a minimum number of hours per week. Individual policies only cover one person or a family unit. It is underwritten based on the risk presented by the individual or family applicants. The benefits available on individual plans may be somewhat less than what is mandated for group plans, so it is very important to understand the benefits offered.
Does it cost more to use an agent or broker to buy insurance than it would to deal directly with an insurance company?
No. Dealing with an agent/broker does not cost any extra, and there are many benefits to doing so. An agent can compare the possible plans from several different insurers to present the client with a variety of viable options. An independent agent can be a definite asset to a client, not only when it is time to search for coverage, but also for help afterwards with navigation through issues that may arise. Since pricing for individual policies is state-regulated, the deciding factor in choosing an insurance agent should be the level of quality service offered both before the sale and during the life of a policy.
Can an insurance company “single out” an individual client and cancel a policy because of health problems?
No. An individual with major health problems can, however, use up all his/her benefits by exceeding their contractual lifetime maximum.
Do insurance companies charge more to insure smokers than non-smokers?
No, not under group plans. Under individual plans, the answer is often yes.
What is a section 125 plan, and why is it important to know if one’s group coverage falls under this classification?
A section 125 plan is a means for employees to pay for certain employee benefits using pre-tax dollars. Premiums are paid through the ease of payroll deduction.
What is COBRA and what does it do?
In 1986, Congress passed the Consolidated Omnibus Budget Reconciliation Act, which provided for continuation of group health coverage benefits which might otherwise be terminated. It allows certain former employees, spouses, dependent children, retirees, and former spouses with continued health coverage at group rates when coverage is lost due to certain specific events.
Who is eligible for COBRA benefits?
COBRA benefits are only available for companies with more than 20 employees. If the company does not offer group insurance, COBRA benefits do not apply. Florida state law also includes a “mini-COBRA” provision, which allows continuation of group coverage for former employees (or eligible dependents) of companies with less than 20 employees. COBRA and mini-COBRA coverage must be requested by the former insured within thirty days of loss of coverage. Qualified beneficiaries/qualifying events include:
· Reduced hours
· Termination or voluntarily quitting job
· Employee becomes entitled to Medicare
· Legal separation or Divorce
· Death of employee
· Loss of dependent-child status
What is a PEO?
A professional employer organization (PEO) is a company which contractually assumes and manages critical human resource and personnel responsibilities which can include payroll services, Workers’ Compensation, Human Resources and benefits administration duties. A PEO will establish and maintain an employer relationship with worksite employees. Human Resource Outsourcing allows businesses to focus on growing the company, while the professional employer organization handles all of the employee administration. In regards to Human resources the Professional Employer Organization is responsible for labor compliance, unemployment claims, maintaining employee files and employee handbooks. In the area of risk management they handle all workers compensation claims and update safety manuals regularly. They also take care of all employee health benefits and payroll matters including tax filings.
Are PEOs recognized as employers?
PEOs operate in all fifty of the United States. Twenty-three states provide some form of specific licensing, registration, or regulation for PEOs. Many states statutorily recognize PEOs as the employer or co-employer of worksite employees for purposes of workers' compensation and state unemployment insurance taxes. The IRS has long accepted the right of a Professional Employer Organization to withhold and remit federal income and unemployment taxes for worksite employees in regards to tax filings. The IRS has promulgated specific guidance confirming the authority of PEOs to provide retirement benefits to workers.
What is the difference between employee leasing and a PEO arrangement?
Although older statutes governing PEO services still use the employee leasing terminology, PEOs are in fact based upon the co-employment of an existing workforce. Today, the major distinction is that employee leasing or staffing service supplies new workers on a temporary or project specific basis. These leased employees return to the staffing service for reassignment after completion of their work at the client. Some would define employee leasing as a supplemental, temporary employment arrangement where one or more workers are assigned to a customer for a fixed period of time, often for a specific project. This concept creates little long-term equity or investment between the worker and customer (much like leasing a car for two years and knowing that you are using it for a specific need but not building any long-term equity). A Professional Employer Organization or co-employment arrangement, however, involves all or a significant number of the client's existing worksite employees in a long-term, non-project related, employment relationship. The PEO assumes employer responsibility for employee administration, workers compensation, labor compliance, employment tax filings, employee files, health benefits, and other human resource purposes. Through the use of a PEO relationship, client companies make a long-term investment in their workers, because in most cases, the Professional Employer Organization provides access to health benefits, retirement savings plans, and other critical employee benefits for their worksite employees. In the event a PEO relationship is terminated, the co-employees will cease to work for the PEO but will continue as employees of the client.
What is the difference between temporary staffing services and a PEO arrangement?
Like employee leasing, a temporary staffing service recruits employees and assigns them to clients to support or supplement the client's workforce in special work situations, such as employee absences, temporary skill shortages, or seasonal workloads. These workers are traditionally only a small portion of the client's workforce. Professional Employer Organization services, contractually assumes and manages employee administration for all or a majority of a client's workforce. Industry ratios identify the PEO arrangement as a long-term relationship with nearly 90% of our clients and worksite employees remaining with the PEO for a year or longer. Worksite employees participate in the PEOs full range of employee benefits including, health benefits, dental, and life insurance, vision care, and retirement savings plans.
Who uses a PEO?
The average client customer of a PEO is a small business with 16 worksite employees, though larger businesses also find value in a PEO arrangement. These small business customers include every single type of business from accountants to small manufacturers and every profession in between including doctors, retailers, mechanics and more. Other forms of HR Outsourcing include the ASO and BPO model’s which are designed to handle larger companies.
How many Americans are employed in a co-employment Professional Employer Organization arrangement?
It is estimated that 2-3 million Americans are currently co-employed in a PEO arrangement. PEOs are operating in every state and the industry continues to grow more at an average of 20% each year. Today, it is estimated there are around 800 PEO companies who are responsible for generating more than $43 billion in gross revenues. NAPEO member companies are estimated to account for more than 70% of the industry's gross revenues.
How does a PEO arrangement work?
Once a client company contracts with a PEO, the PEO will then co-employ the client's worksite employees. In the relationship among a Professional Employer Organization, a worksite employee, and a client company, there exists a co-employment relationship in which both the PEO and client company have an employment relationship with the worker. The PEO assumes responsibility and liability for the employee administration such as risk management or workers compensation, personnel management, employee files, labor compliance and payroll tax filings. The client company retains responsibility for and manages product development and production, business operations, marketing, sales, and service. The PEO and the client share certain responsibilities for employment law compliance. As a co-employer, the PEO will often provide employee administration, labor compliance, workers compensation, employee handbooks and health benefits for the worksite employees.
Why would a small business use a PEO?
Small business owners want to focus their time and energy on the "business of their business" and not on the "business of employment." As businesses grow, most small business owners don't have the necessary human resource training; payroll and accounting skills; knowledge of regulatory compliance; or backgrounds in risk management, insurance and employee benefit programs to meet the demands of being an employer. Human Resource Outsourcing takes over the employee administration for the business owner allowing them to grow their business.
Does the small business owner lose control of his or her business?
No. The client retains ownership of the company and control over its operations. As co-employers, the PEO and client will contractually share or allocate employer responsibilities and liabilities. The PEO will generally only assume responsibilities and liabilities associated with a "general" employer for purposes of employee administration, payroll, taxes and benefits. The client usually retains those rights and responsibilities associated with "special" employers related to actual business operations. As such, the client will continue to have responsibility for worksite safety and compliance. The PEO will be responsible for payroll and employment taxes, will maintain employee files, employee handbooks and health benefits. Because the Professional Employer Organization may also be responsible for workers' compensation, the PEO will also focus on improving safety manuals and compliance. In general terms, the PEO will focus on employment-related issues and the client will be responsible for the actual business operations.
Why would a worker of a small business want a PEO as an employer?
Workers seek financial security, quality health insurance, a safe working environment, and opportunities for retirement savings. PEO services provide Fortune 500 quality employee benefits including, health insurance and 401(k) savings plans, and aggressive workplace risk management and safety manuals. Job security is improved as the PEO's economy of scale permits a business to lower employment costs. When workers are provided quality human resource services like employee handbooks, safety manuals, grievance procedures, and improved communications; job satisfaction and productivity increases.
Is this just a "fired and rehired" scheme?
No. Workers are not fired by the client business and rehired by the PEO. Instead, a worker becomes an employee of two employers in a co-employment relationship. The PEO assumes employer responsibilities and liabilities for the human resource and personnel obligations of the worksite employees. This responsibility includes the employee wages and employment taxes, workers' compensation and unemployment insurance, and employee benefits. The small business retains employer responsibilities and supervision for the production of the products or the delivery of services. HR Outsourcing, otherwise known as PEO services, ASO and BPO services are legal and approved through each state’s department of labor as well as IRS code.
Is this a scheme to avoid providing health or retirement saving benefits to rank and file workers?
No. The reverse is generally true. Frequently, HR Outsourcing arrangements are the only opportunity for a worker of small businesses to receive Fortune 500 quality employee benefits like health insurance, dental and vision care, life insurance, retirement saving plans, job counseling, adoption assistance, and educational benefits. Without HR Outsourcing, a small business can neither afford nor manage these benefits.
Who is responsible for the employees’ wages and employment taxes?
Using Human Resource Outsourcing through PEOs, ASO or BPO programs, they assume responsibility and liability for payment of wages and compliance with all rules and regulations governing the reporting and payment of federal and state taxes on wages paid to its employees. PEOs have long established their role as reporting income and handling withholding, FICA and FUTA. In 2002, the IRS issued guidance confirming the ability of human resource outsourcing entities (including PEO services) to offer qualified retirement benefits.
Who is responsible for state unemployment taxes?
As the employer for employment tax and employee benefits, PEOs assume responsibility and liability for payment of state unemployment taxes, and most states recognize the PEO as the responsible entity. A few states require the PEO to report unemployment tax liability under its clients' account number, and some states may hold the client and PEO jointly liable for unemployment taxes.
Who is responsible for employment laws and regulations?
Both the client and the Professional Employer Organization have compliance obligations. However, PEOs provide worksite employees with coverage under the entire spectrum of employment laws and regulations, including federal, state, and local discrimination laws, Title VII of the 1964 Civil Rights Act, maintaining employee files, employee handbooks, safety manuals, Age Discrimination in Employment Act, ADA, FMLA, HIPAA, Equal Pay Act, and COBRA. In many cases, these laws would not apply to workers at small businesses without the PEO relationship, since many statutes have exemptions based upon the number of workers in a work force. Once included in the PEO's workforce, the workers are protected by these laws.
Who is responsible for workers' compensation?
Many states recognize the PEO as the employer of worksite employees for purposes of providing workers' compensation coverage.
Does a PEO arrangement impact a collective bargaining agreement?
No. PEOs work equally well in union and non-union worksites. The National Labor Relations Board (NLRB) recognizes that, in co-employment relationships, worksite employees are appropriately included in the client employer's collective bargaining unit. Where a collective bargaining agreement exists, PEO services fully abide by the agreement's terms. PEOs endorse the rights of employees to organize, or not organize, according to standards of the NLRB.
What is life insurance?
Life insurance is a financial resource for your loved ones in the event of your death. You enter into a contract with an insurance company, which promises to provide your beneficiary(ies) with a certain amount of money upon your death. In return, you make periodic payments, known as premiums. The amount of the premiums generally depends on factors such as your age, gender, occupation, medical history and whether you intend to build up cash value in your policy. Some policies may require a medical exam. Certain types of life insurance may also provide benefits for you and your family while you're still living. Such policies accumulate cash value on a tax-deferred basis that can be used for future needs such as supplementing your retirement income, help provide for a child's education, and pay estate taxes and funeral expenses.
Do I need life insurance?
The ability to earn an income can be considered your family's most valuable asset because your income allows you to obtain other assets, particularly the necessities of life and, of course, the creature comforts. However, as we know, the ability to earn an income is not guaranteed. Yet, the need for income may continue for those who were financially dependent upon you. Consequently, your need for life insurance and the amount will depend upon your personal and financial circumstances. If any of the following statements apply to you, you probably do need to consider life insurance:
You have a spouse; You have dependent children; You have an aging parent or disabled relative who depends on you for support; You have another loved one that you wish to provide for; You have business or estate planning needs that life insurance can satisfy; Your retirement pension and savings are not enough to insure your lived ones' futures against a rising cost of living.
How can I choose the policy that's right for me?
Life insurance is a long-term commitment. Before buying any policy, ask yourself these very important questions: +How much insurance do I need? If I were to die, what would my spouse and dependents need in order to live comfortably? +In addition to protection, what am I trying to accomplish with life insurance? Am I accumulating funds for education costs? Providing away to pay estate taxes? Do I need some additional supplemental income for my retirement or emergencies? +How much can I afford to pay for a policy? +Is the insurance company I'm considering financially secure? Do they have a good claims payment history, good customer service and competitive prices? Independent companies such as Standard and Poor's, A.M. Best, Moody's, Fitch and Weiss rate insurance companies and their publications can be found in your local library.
What are my options?
There are four basic types of life insurance to meet your individual needs. +Term life insurance. Coverage is in effect for a fixed term or period of time - usually one to 30 years - and usually can be renewed. The policy pays your beneficiary a fixed amount of money if you die during the term of the policy. +Whole life insurance. The premiums remain at a fixed level for the duration of the contract. Over time, the policy generally builds up cash value on a tax-deferred basis. You should keep in mind that life insurance should not be purchased solely for accumulation. Its primary purpose is protection. Also, withdrawals and/or loans will decrease the death benefit. +Universal life insurance. These policies are interest-sensitive and permit the owner to adjust the death benefit and/or premium payments, within limits, to fit the owner's situation. Your net premium payments are applied to the accumulation fund, which earns a guaranteed interest rate. The monthly cost of the death benefit and policy administration is deducted from the accumulation fund. Since you decide how much premium to pay, within limits, some universal life policies even allow you to skip payments. If you skip a premium payment, the administrative and death benefit costs are deducted from your cash value. The policy stays in effect until your cash value can no longer cover these costs. Universal life insurance rates are subject to change, but the rate will never fall below the minimum rate guaranteed in the contract.
How can I conserve costs?
Here are some ways you can save money when purchasing the life insurance that's right for you: +Don't buy insurance if you don't need it, and don't buy more insurance than you actually need to provide for your loved ones. +Shop for a competitively-priced policy while you are in good health. Don't smoke. Take care of yourself by exercising regularly and maintaining a moderate weight. +If you buy term insurance, look for guaranteed renewable policies. That way you won't have to shop for a new policy (with higher premiums) when you're older. +Buy additional riders, which are optional forms of coverage, only if you need them. +Shop around and compare prices and coverage. Get at least three quotes on comparable policies, and ask questions about the policy's renewal and withdrawal provisions.
What if I already have life insurance coverage?
Even if you have life insurance, keep in mind that life changes and, as it changes, so do your needs for protection. Your life insurance needs should be reviewed every few years. Any of the changes listed below should prompt you to sit down with your insurance agent to make sure your plan is still appropriate:
You have recently married or divorced; A child or grandchild has been born or adopted; Your health or your spouse's health has deteriorated; You have begun to provide care or financial help to a parent; A loved one will require assistance or long term care; You have recently purchased a new home; Your children or grandchildren are about to enter school or college; You or your spouse retired or will retire early; You or your spouse has been promoted recently; You have refinanced your home mortgage in the past six months; You or your spouse has received an inheritance.
Can I trade or replace my policy?
You can trade or replace your policy, but it's not something to be considered lightly, regardless of whether you are thinking of switching policies within the same company or switching from one company to another. New policies typically have high costs the first few years and there is normally a new "contestability period" during which the insurer can cancel the policy and refuse to pay death benefits if an application was misleading. If you want to increase your total life insurance, it may be better to keep your old policy and simply add a new one, or increase your specified face amount under the same life insurance policy.
Long Term Care
What is long term care?
Long term care refers to assistance with the very basic, everyday activities that most of us can do for ourselves. We call them ADLs or Activities of Daily Living. As a result of illness, injury or advanced age, many people need assistance in order to eat or dress or bathe. The need for long term care may also result because a person has cognitive impairment. Some people need supervision or reminders to accomplish every day activities, such as using the toilet, eating, bathing, dressing, and so forth.
How long is “long-term”?
“Long term” cannot be uniquely defined. In 1996, the Federal government effectively defined a “long-term” need for assistance as one that lasts at least 90 days. Some policies provide coverage on the first day that the insured person meets the criteria for benefits. Others require 30, 60, 90, or 120 days of assistance before benefits become payable.
Who pays for long term care?
Approximately half of all long term care expense is paid by state Medicaid programs. About one-third is paid out of pocket by individuals and their families. Medicare only provides for some skilled care in some very “limited” situations. Neither Medicare supplemental insurance nor major medical coverage provided by most companies pays for long term care. This leaves approximately one-sixth of the total cost to be covered by other government programs and private insurance.
Who should consider purchasing long term care insurance?
Anyone who is age 45 or older should consider long term care insurance when planning his or her insurance needs. "Consider" does not necessarily mean "purchase". Depending upon a person's particular insurance budget, there may be other insurance needs that deserve priority. Certainly, the purchase of long term care insurance should never create a financial hardship.
What are the factors I should consider in analyzing my need for coverage?
1. Scope of facilities in which treatment must be performed (e.g. nursing home vs. assisted living) 2. Scope of "professionals" who can perform the care (e.g. nurses vs. aids.) 3. How benefits are paid: Reimbursement or indemnity 4. Maximum lifetime benefits 5. Maximum daily benefits 6. The conditions that "trigger" benefits 7. Elimination (or waiting) period before benefits begin 8. Inflation protection 9. Qualified or non-qualified policy 10. Discounts for husband and wife 11. Restoration of benefits 12. Waiver of premium if benefits are being paid 13. Nonforfeiture benefits if you stop paying premiums 14. Premium paying period 15. Respite care
Why should someone 45 years old worry about long term care?
It is difficult to know in advance who among us is going to need long term care. Also, it is difficult to predict who will develop a medical condition between the ages 45 and 60 that would preclude the purchase of long term care insurance -- when the potential need for assistance with ADLs is just a few years away. Another consideration is the premium, which is generally lower at younger ages. Early purchase can make long term care coverage affordable later on, particularly after retirement.
Does medicare cover long term care?
Medicare will only provide for some skilled care in very limited situations. It was not designed to cover activities of daily living. Rather, it was designed to cover acute care or skilled care such as that provided during a short hospital stay.
Does medicaid cover long term care?
Yes, but in very limited situations. Medicaid will generally apply only to those with very low incomes and very few assets. Even then, there is only limited choice of what and where benefits will be provided. For example, there might be limited choice of physician and facility, no control over the number of people sharing a room, or no ability for the family to pay for any extras.
Does medical insurance cover long term care?
Although medical insurance has some aspects of long term care, they are not the same thing. For example, some medical plans may pay for the services of a nurse while you are recovering from an illness or an injury that requires medical attention. This medical benefit is very limited. Once you are better or reach the maximum benefit for nursing services, this benefit would cease to be available. Medical insurance is not designed to cover activities of daily living. Long term care is designed to cover activities of daily living.
What kind of care is covered by long term care policies?
Covered expenses can vary from policy to policy. In a comprehensive policy, benefits are paid for services delivered in nursing facilities, assisted living facilities, adult day care centers, or at home. A non-comprehensive policy restricts the benefits to services that are provided in nursing facilities. Care is further subdivided into skilled care and custodial care. Skilled care is generally ordered by a physician under a plan of treatment, and is provided 24 hours a day. It is usually provided in a nursing home. Personal care or custodial care helps a person perform ADLs (activities of daily living) -- assistance that can be provided in almost any setting.
What activities are included in the ADLs (Activities of Daily Living)?
Technically, ADLs refer to the triggers that would indicate that benefits might become payable. The broadest definition would include ambulating (walking), bathing, continence, dressing, eating, transferring to or from a bed or wheel chair, and using toilet facilities. The actual ADL's that are considered and the number needed to trigger benefits vary from policy to policy.